創力 (LTRX) 2010 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Quarter Four 2010 Lantronix Inc. earnings conference call. My name is Jennifer and I will be your operator for today. (Operator Instructions). As a reminder, this call is being recorded for replay purposes.

I would now like to hand the call over to Charlie Messman of MKR Group. Please proceed.

Good afternoon, everyone, and thank you for joining Lantronix fiscal 2010 fourth-quarter and year-end conference call. Joining us today on the call are Jerry Chase, Lantronix Chief Executive Officer, and Reagan Sakai, Lantronix Chief Financial Officer.

A live and archived webcast of today's call will be available at the Company's website at www.Lantronix.com. In addition, a phone replay will be available through September 9. The number to call for replay is 888-286-8010, using the passcode 2416-5699. From international locations, you may dial 617-801-6888, using the same passcode.

As a reminder, during the course of this conference call, management will make forward-looking statements in their prepared remarks and in response to your questions concerning, among other things, our plans for future products introduction, upcoming planned product releases, the implementation of new corporate marketing messages and marketing techniques, and statements regarding future financial metrics, including our non-GAAP outlook and cash flow.

These forward-looking statements are based on Lantronix's current expectations, and are subject to a number of risks and uncertainties. Actual results could differ materially as a result of several factors. For a more detailed discussion of these and other risks and uncertainties, see the Company's recent SEC filings, including its Form 10-Qs filed for the fiscal quarters ended March 31, 2010; December 31, 2009; and September 30, 2009; and Form 10-K filed for fiscal year ended June 30, 2009.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, and the Company undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances.

With that said, I'd now like to turn the call over to Jerry Chase, President and Chief Executive Officer of Lantronix. Jerry?

Good afternoon, everyone, and thank you for joining us.

We saw continued positive momentum in the fourth quarter with our highest level of shipments over the last six quarters and with strong bookings. We also achieved our eighth consecutive quarter of non-GAAP profitability and ended the quarter with a significant increase in our cash balance.

Shipments in the fourth quarter reached $13.1 million, their highest levels in six quarters, contributing to the substantial improvement in our cash balance at quarter end. Not all of those shipments were turned into revenue because we recognize revenue when our distributors ship to their customers, not when we ship to our distributors.

Our topline number was $11.8 million, which represents 4% growth over the same quarter last year. We saw almost all of our distributors take on an increased level of our products in what we believe is an anticipation of future demand.

As many of you know, our new generation of customer-driven products began launching late last calendar year. It usually takes nine to 18 months after a new product is launched for it to start positively impacting our top and bottom lines, and that is what we are seeing as the new generation starts to come online from a revenue perspective.

This is because of the time it takes to identify customer needs, have customers evaluate our products, then design our products into their products in the case of our embedded solutions, then go through a test phase, and then to full production. This is normal. And as I mentioned, we are beginning to see those products launched late last calendar year positively impact our results.

Going forward, we have a full product pipeline and we will continue to launch new customer-driven products and solutions in the coming months.

In addition to our expanded product offerings, our focus on medical device connectivity has strengthened and better positioned Lantronix for growth. Our customers turn to us when they want to save time and money by connecting their equipment to the Internet and then controlling their equipment remotely.

Some recent examples of where we work with new customers with our new products to help them save time and money include Perinata, a recently-launched IT services company which was founded to fill a gap in IT services for small businesses who often lack the funds and expertise to support a full-time IT staff or implement an expensive VPN solution.

Our ManageLinx solution provides secure access to firewall-protected devices via the Internet, enabling Perinata to provide robust, pay-as-you-go IT services from remote locations, giving Perinata's clients the advantage of quickly and easily accessing business-critical information anytime, anywhere.

Another customer, BlueWave Security, supplies manufacturers, security dealers, and systems integrators in the physical security industry with IP-based physical access control solutions. BlueWave selected Lantronix's XPort Pro with ManageLinx VIP Access to futureproof its next-generation security product line with best-in-class networking capability and to enable secure remote access to their security panels behind firewalls.

XPort Pro is helping BlueWave extend their competitive advantage, lower cost of ownership, and improve ease of use for their customers.

Speaking of XPort Pro, you may recall that in May, XPort Pro won EDN magazine's 20th annual innovation award in the embedded system technology category. Noted at the time were XPort Pro's powerful 32-bit architecture and extensible standards-based Linux software platform, which provides developers an ideal, all-in-one compute and connectivity solution.

Another new customer of ours is using SpiderDuo to access its equipment in clean rooms where semiconductors are made. The benefits are obvious -- secure access and control of equipment inside the clean rooms as if it were right in front of the technical staff, without the need to enter the clean room. A couple thousand SpiderDuos will be shipped to this customer between this quarter and next.

In addition, we announced earlier today a new customer, United Oil. United Oil is a large fueling station services company which provides a wide variety of retail station design and branding, customer experience services, and wholesale fuel sales and services to Shell, Exxon, Mobil, ConocoPhillips, and United Oil branded stations throughout the U.S.. United Oil selected our ManageLinx solution using VIP Access-enabled EDS 1100s to remotely manage gasoline storage tanks for data collection and analysis at 70 Shell stations here in southern California.

As I mentioned a moment ago, these are just some of the new customers we are working with on a few of our new products. We were also pleased this quarter to help new customers save time and money with Spider, an established and growing product solution.

Net Direct is a leading provider of server hosting services to small and large and public and private companies. Net Direct uses Spider to enable its clients to perform routine maintenance and remote troubleshooting without engaging Net Direct's technical support department. Net Direct's clients now perform routine maintenance, install operating software, or troubleshoot its own servers 24/7 without having to call in the customer care team.

XLHost is also a provider of hosting services. XLHost also uses Spider to enable their customers to access their servers without involving XLHost's technical support team. But in addition, XLHost has increased its revenue stream by charging customers for the unique ability Spider provides.

A very exciting recent development for Lantronix was the announcement of AccessMyDevice.com, a subscription-based service that allows equipment to be securely and remotely accessed behind firewalls from anywhere via a secure Web browser. You may have heard of consumer computer-oriented services such as LogMeIn.com or GoToMyPC.com.

Not only does AccessMyDevice.com provide remote access to PCs and laptops, but more importantly it is an enterprise-grade service that is optimized for business and technology professionals to remotely view, manage, control, and service network-enabled devices such as medical equipment, slot machines, kiosks, servers, industrial machinery, and other equipment and electronics from any PC or mobile device.

AccessMyDevice.com will initially be offered as a bundled solution consisting of a SpiderDuo and free six-month subscription services. Going forward, AccessMyDevice.com will support all of our VIP Access-enabled products. It will also support other non-Lantronix VIP Access-enabled products, including semiconductors.

You may recall that we have already integrated VIP Access with the Renesas 32-bit SuperH family of processors, and we're in the process of integrating with additional semiconductor manufacturers. We believe the substantial savings in time and money to our customers through AccessMyDevice.com will be game-changing. For Lantronix, this service will drive new product sales and create a new recurring revenue stream from the monthly subscription service offering.

As we continue to build sales of our new products in all our key markets, we are especially focused on the healthcare vertical. Hospitals, laboratories, medical device manufacturers are doing everything they can to maintain quality in patient care, while also undergoing major cost-containment or even cost-cutting pressures. Reduced staffing compounds the problem as doctors, nurses, technicians, and engineers are working harder than ever to achieve -- to deliver the same quality in patient care.

Medical device networking enables healthcare providers to save time and money by doing more with less. With our products, providers can automate and safeguard data collection and dissemination, and facilitate remote patient monitoring and asset tracking, while also reducing service costs.

To more directly address this significant opportunity in healthcare, this past July we announced investment plans for new products and new marketing and sales resources within this new vertical. As part of these initiatives, we appointed a new VP of Marketing and VP of Product Management, and added medical device connectivity sales professionals in the U.S., Europe, and Asia.

We also began a global rebranding effort and have created a strategic roadmap to develop products that serve all our markets, but that are optimized for medical device connectivity.

We are also developing strategic partnerships with medical industry software providers. We see a significant growth opportunity in healthcare at both the OEM and hospital level, and with our industry-leading secure connectivity solutions, we believe we are well positioned to benefit from this rapidly growing market.

I will now turn the call over to Reagan for a review of our financial results.

Thank you, Jerry. In addition to GAAP results, we report adjusted net income and adjusted operating expenses, referred to as non-GAAP net income or loss and non-GAAP operating expenses, respectively, and non-GAAP net income or loss per share.

Please refer to our earnings release hosted in the investor relations section of our website, where we have provided the definition for these non-GAAP financial measures. We believe that the presentation of non-GAAP financial measures provide important supplemental information to management and investors regarding financial and business trends relating to the Company's financial condition and results of operations.

The non-GAAP financial measures disclosed by Lantronix should not be considered a substitute for or superior to financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. The non-GAAP financial measures used by Lantronix may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. In our investor relations section of our website, we have provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

Turning to our financial results for our fiscal fourth quarter, net revenue was $11.8 million, a 4% increase over the fourth quarter last year and down 3% sequentially. As Jerry mentioned, we shipped $13.1 million in the fourth quarter, which contributed to the substantial improvement in our cash balance at quarter end. However, our distributors increased their inventory levels by approximately $1.2 million.

As you know, we recognize revenue upon sellthrough, so not all of these shipments were recognized as revenue. In addition, there was an industrywide shortage of certain components, which reduced available product that we might have otherwise shipped and recognized as revenue.

Gross profit margin increased to 50.8% in the fourth quarter, compared to 49.4% in the fourth quarter a year ago. The increase in gross profit margin percent primarily reflects a decrease in inventory and warranty reserve expenses, offset by an increase in freight costs due to expedite charges relating to component and product shortages.

GAAP operating expenses were $6.5 million, compared to $6.1 million for the fourth quarter a year ago. Approximately $400,000 of the increase was attributable to discontinuing our corporatewide furlough program for the fourth fiscal quarter.

Selling, general, and administrative expense was $4.7 million, compared to $4.5 million in Q4 a year ago. The increase was primarily due to an increase in personal expenses as the Company discontinued its corporatewide furlough program for the fourth fiscal quarter and severance-related charges.

Research and development expense was $1.7 million, compared to $1.5 million a year ago. The increase was primarily due to an increase in personal expenses as the Company discontinued its corporatewide furlough program for the fourth fiscal quarter.

GAAP net loss was $509,000, or a loss of $0.05 per share, compared to a net loss in the fourth quarter last year of $553,000, or a loss of $0.05 per share.

On a non-GAAP basis, operating expenses were $5.9 million, compared to $5.4 million in Q4 last year. Non-GAAP net income was $169,000, or $0.02 per share, compared to non-GAAP net income of $326,000, or $0.03 per share, last year. This is our eighth consecutive quarter of non-GAAP net income, one of our key objectives for the fiscal year.

Turning to the balance sheet, we increased our cash position substantially during the quarter. Cash and cash equivalents increased $762,000 to $10.1 million, compared to $9.3 million as of March 31, 2010.

As mentioned above, the strong shipments in the fourth quarter contributed to the improvement in our cash balance at quarter end.

Total receivables, which include Accounts Receivable and contract manufacturers receivables, were $2.4 million, compared to $2.5 million a year ago. Net inventories were $6.9 million, compared to $6.5 million a year ago. Accounts Payable were $6.5 million, compared to $5.6 million a year ago. The increase was due to the timing of inventory receipts during the quarter as inventory is the primary driver of Accounts Payable.

Working capital as of June 30, 2010, was $7.6 million, compared to $8.1 million as of June 30, 2009.

I'd now like to provide some insight into what we're seeing early in our 2011 first fiscal quarter and thoughts on the business as we move into the new fiscal year. We are excited about the release of our new products and technologies and overall customer feedback. However, we remain dependent upon the overall health of the global economy.

For our fiscal 2011, we are focused on growing revenue, maintaining non-GAAP profitability, investing for the future with the hiring of key strategic positions, and strengthening our balance sheet. We plan to achieve revenue growth and gross margins in the 50% to 53% range.

We continue to believe that there is significant operating leverage in our business model, but we will invest in certain strategic hires and projects that will affect quarterly operating expenses. We believe these activities will better position Lantronix for sustained revenue growth and penetration within the medical vertical.

I would now like to turn the call back to Jerry.

Thank you, Reagan. Looking to the future, the turnaround phase of Lantronix is solidly behind us. Through hard work, the Lantronix team has the platform, the structure, the discipline, and with our focus on medical device connectivity, the direction to grow our business.

This concludes our prepared remarks, but before turning the call over for questions, I'd like to take the opportunity to thank my Lantronix colleagues, our investors, our partners, and especially our customers for your ongoing support of Lantronix. Jennifer, we'd like to open the call to questions.

(Operator Instructions). It appears that we have no questions.

Thank you, Jennifer. I'd like to thank everyone for your participation on our call today, and we look forward to speaking with you next quarter.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect, and have a great day.